The Motley Fool

3 ASX dividend shares to beat the RBA’s low interest rate

The Reserve Bank of Australia (RBA) decided this week to keep the Australian interest rate at 1%, but this is still a record low.

A 1% interest rate doesn’t help people with cash in the bank or people who own bonds. $1 million earning 1% only makes $10,000 of income a year.

I think we need to find better sources if income. For me, the only real option for income is (ASX) shares. Property prices have gone too high and have pushed the yields down too low to be worth considering for income.

Here are three interesting ASX dividend shares to consider:

Rural Funds Group (ASX: RFF) 

The real estate investment trust (REIT) appears to have come through the short attack and defended its financials and integrity.

However, the share price is still 12% lower than it was a month ago, which pleasingly boosts the distribution yield of the farmland REIT 12% higher than it was.

The cash net rental profit continues to be generated quarter after quarter and the attractive distribution continues to flow on. Rural Funds has a diverse farmland portfolio with high-quality tenants and long lease periods which provides pleasing cash certainty for investors. 

The Rural Funds FY20 distribution yield of 5.2% could be too good to ignore as it continues to grow by 4% a year whilst Rural Funds continues to re-invest just over 20% of its cash profit for more growth.

WAM Microcap Limited (ASX: WMI) 

The small cap world of the ASX hasn’t been receiving a lot of attention lately, but I think over the longer-term it’s certainly possible to find a number of hidden treasures there.

But I’m happy to leave the investing to a high-quality small cap manager like WAM Microcap – a listed investment company (LIC) – that has delivered a portfolio average return per annum of 21.1% before fees since inception in June 2017.

WAM Microcap is paying out a growing ordinary dividend and has also declared special dividends in FY18 and FY19 reflecting the strong performance of the company. It currently offers a grossed-up ordinary dividend yield of 4.7%.

Tassal Group Limited (ASX: TGR) 

Tassal is a large salmon and prawn farming business. It’s quite different to most other dividend shares on the ASX, but I think it could be worth considering for a small part of a dividend portfolio.

Tassal’s operating earnings continue to go higher and higher each with a bigger harvest, bigger fish and better operational efficiencies. I like its diversification plan to go into the prawn business too, lowering the overall risk of the company.

It has a grossed-up dividend yield of 6%. But the (low) potential of ‘wipeout’ from a disease or some other event means I wouldn’t pin a lot of my income needs on Tassal.  

Foolish takeaway

I think each of these businesses could be better sources of income than most ASX blue chips or the ASX index overall over the next five years.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...